The Little Known Secret Alternative
to CDs and the Stock market Fiasco
Tips and Ideas that
Could Save You Thousands
Presented
by
Hank Progar, MBA
941-355-4362
AIM Safe Money Advisors
Bibliography - Hank Progar, MBA
As an Insurance Specialist teaching the self-employed, pre-retired and retired in Central Florida how to protect their assets and get affordable insurance plans and financial services ... My expertise is to work with you to develop a program giving you a balance between what you want ... what you really need ... and your financial investment
Many self-employed people find it difficult to obtain affordable health insurance and often go without any insurance at all. We are affiliated with many A rated insurance companies here in Florida that cater to the individual and self-employed market. Working together you will have access to Affordable Insurance Plans ... for pennies on the dollar, including Life and Health benefits ... so you will have the money you or your loved ones need if your health fails you. At the same time, you can unlock financial growth for your long term retirement savings nest egg ... with NO risk to losing your hard earned assets.
A little personal background ... I have both an MSEE and an MBA with over 35 years in research, management and consulting. I am a self-employed business person, much like yourself, and thought I was knowledgeable about all aspects of business life. When my wife, Kay and I moved to Ocala Florida for personal family reasons in 2000, I started learning things that I never knew about health insurance ... at least the way it is in Florida.
At the same time, like many of you, we experienced devastating losses to our retirement savings ... as the S&P 500 plumeted 47% and there was blood in the streets. This was coming off a major real estate crash in Southern California, where our personal home and rental properties had decreased 50% over a seven year period, and were sold in 2000 for the 1988 appraised value.
Even though some good years followed, IRA accounts were bleeding again in late 2007 ... along with Real Estate. All of this launched me into a mission to help others, and fuels the passion for what I do today.
Now, I show other self-employed, pre-retired and retired individuals in the Central Florida area how to save money and protect the assets they have worked so hard to obtain ... grow your assets without risk ... reduce your IRS bill with tax reduction strategies ... reduce or eliminate probate court losses ...and provide you peace of mind and "sleep insurance" so you can enjoy life and have fun doing what you do best.
Member
"The Little Known Secret Alternative to CD's and the Stock Market Fiasco"
Senior Citizen Goes Crazy and Attacks Her Banker...Frustrated Over 2% CD Rates Reveals What To Do
Mabel, a fragile grandmother often, was finally pushed over the edge after hearing that her CD renewal rate was only 2%. "How could a bank, I have been a loyal customer to for over 15 years, give me a miserable 2% interest and I even have to pay taxes on the interest I receive. And you soak me with a whopping 14% on my credit cards? Cancel my account and give me my money now!"
Mabel had enough, she didn't mean to hit the banker with her purse...it was just a reaction of frustration and down right disgust.
Many of my clients and fellow investors are turning to a new little known strategy that truly offers the "best of both worlds". It includes many of the safety features found in CD's but with higher potential returns. It offers the greater potential growth of stock market index linked returns but without the risk normally associated with the stock market. Amazingly, $760 Billion moved into these accounts called Fixed Index Annuities, from 1999 to 2002. This report will explain why.
By the way, have you ever stopped to wonder just how much $1 Billion is? Consider that if you could have spent $1000 each and every day from the birthday of Jesus until today, YOU STILL WOULD NOT HAVE SPENT ONE BILLION DOLLARS! Needless to say, One Billion Dollars is a lot of money but $760 Billion is obviously a whole lot more!
"WHY," you might ask is there such an exodus to Fixed Indexed Annuities?
In a copy of a Wall Street Journal Article rewritten in The Arkansas Democrat Gazette, it states "The hottest product on Wall Street these days is the lowly annuity. With the stock market
heading toward its third-straight losing year, investors seeking stable returns are pouring record amounts of cash into fixed annuities.
I think everyone right now is desperate to find any place where money is safe."
Source: Arkansas Democrat Gazette, September 1, 2002
It can simply be boiled down to just one word, SAFETY!
"The principal reason that individuals purchase an annuity is safety. Because of that fundamental need for safety, the insurance industry has gone to great lengths to protect the contract holder and guarantee his or her investment. As a result, no annuity contract holder has ever lost one cent of principal in an annuity."
Source: Annuities, David Shapiro, CFP, Chapter 7, Page 64
Again, in a book written and researched by Gordon K Williamson, a prominent Harvard MBA, he writes, "No one has ever lost a dime in a fixed rate annuity. The safety record of this conservative investment vehicle is unequaled.
When you purchase a fixed rate annuity, your principal is guaranteed every day. "
Source: All About Annuities, Gordon K Williamson, Chapter 3, Page 19
And it's certainly no surprise that retirees are looking for SAFETY!
This story appeared in the Wall Street Journal Online. "If you are saving for retirement, the stock market's plunge has been painful. If you are already retired or are nearing that point, it has likely been a disaster.
The bear market of the past 2 ½ years has wiped away more than $678 Billion of retiree wealth, according to new calculations based on the University of Michigan's Health and Retirement Study....Some annuities are seeing renewed interest because they can offer returns higher than those on bonds....Retirees should generally avoid variable annuities, which often carry high fees and other unattractive features. Instead look for fixed annuities in which there is a guaranteed rate of return for a period of years-and no charge for cashing out at the end of that period. "
Source: The Wall Street Journal Online, July 9, 2002
NO RISK OF LOSS is very important!
When Warren Buffet, the manager of the now famous Berkshire Hathaway Mutual Fund was asked for his iron-clad rules for successful investing, he stated:
RULE # 1: Never Lose Money!
RULE # 2: Never Forget Rule Number 1!
On a similar note, Lou Dobbs, 20 year host of CNN's Moneyline has seen booms, busts and everything in between. When asked by AARP magazine "What are some secure investments you recommend?"
He put it this way, "I truly believe you should not have money in the market that you cannot afford to lose. Period. Even though over the long term, equities produce the greatest returns, they also produce some of the most significant losses in short periods."
Source: AARP Magazine, November/December 2002
So, keeping SAFETY in mind, what makes the NEW Fixed Index Annuity the hottest product to hit the market in years? It simply offers the best of all worlds. It is a fixed annuity with all the GUARANTEES that accompany a fixed annuity, but, it offers Stock Market based returns with NO RISK OF LOSS. It also has a minimum guaranteed return even if the stock market were to stay in the tank the whole time you have your Fixed Index Annuity! Besides that, your gains become locked in and GUARANTEED as well. Your account can never go backward!
It's no wonder that Business Week Online when interviewing Jack Marrion for an article entitled "A Bear-Proof Way To Ride The Market" states, "You can insure your car for theft and your house for fire, but can you buy insurance that prevents you from losing your shirt on Wall Street? Fixed-index annuities, or EIA's, are insurance products that fit the bill.
They pay some of the returns of stock market indexes such as the Standard & Poor's 500, and even guarantee a minimal rate of return. "The worst you can do is get your money back and a few extra dollars," says Jack Marrion, CEO of Advantage Group, an annuity research firm.
The concept is simple: a guaranteed return in exchange for a limited upside."
Source: Business Week Online, April 30, 2001
And just what does this mean? It simply means your account is GUARANTEED to never go backwards even in a plunging market!
An article in The Los Angeles Times also interviewing noted financial Guru Jack Marrion states, "In return for giving up some of the investment potential of the index itself, the investor gets a guarantee that the worst his investment can do over a specified period is earn a zero return.
The average annual return of these investments has been about 8.7% over the last five years, Marrion said. The S&P 500, the most commonly used stock market index, returned almost 11% a year over the same period."
Source: Los Angeles Times, January 6, 2002
So, what is the REAL trade off for the 100% GUARANTEED SAFETY of Fixed Index Annuities compared to the actual returns of the stock market or Fixed mutual funds?
The answer may shock you!
Dalbar, Inc., a third party research company, did a study on Annualized Returns for Equity Mutual Fund investors from 1984 to 2003. The S&P 500 returned 12.98% over this period. The "average" stock Mutual Fund investor had a 3.51% annualized rate of return, which amounted to only 27.04% of the 12.98% return of the S&P 500 index. The "systematic" stock fund investor such as "dollar cost averaging" sorts of investors actually averaged 6.80% or 52.39% of the return of the S&P 500 index. The "market timer" stock fund investor had an average annualized rate of return of -3.29% or -25.35% of the return of the S&P 500 index.
Dalbar, Inc. Cited in the Wall Street Journal, August 29, 2004
So what does this study tell us?
The very best category of stock fund investor, the "systematic" stock fund investor, took on all the risk of equity investing but, in reality, got only around half of the return of the S&P 500 index! The "average" stock fund investor and the "market timer" did even worse!
WHY? ...How Could This Be?
Well, some excerpts of speeches given by John C. Bogle, founder of the well known "No Load" Vanguard Mutual Fund Company sheds light on some of the reasons why.
"Equity mutual funds rated 4 star or 5 star by Morningstar (their highest ratings)
· - In the last 10 years, ending 2003, the average return of the star funds was 6.9%
· - In the same 10 years, the S&P 500 average return was 11%
Source: Washington State University, April 13, 2004
And again, "An often overlooked piece of investing ... COSTS MATTER
♦ Sales commissions when mutual funds are first purchased
Management fees
Operating costs
♦ Ongoing costs when managers buy and sell stock in the fund
TAXES
With total costs of 4% compounded year after year the average investor over the last decade has averaged an after tax rate of return of 50% of the market. Yes, costs matter!"
Source: Princeton New Jersey, May 28, 2004
And then we have an excerpt from testimony for hearings by the capital markets sub-committee of congress. "Over the past 20 years, costs have deprived the average equity fund investor of nearly one-half of the stock market's return."
Source: Associated Press, Thursday, March 13, 2003
So, we see that the average equity mutual fund investor takes 100% risk for an average after tax return of 6% to 7% according to the Dalbar study. THIS MEANS A RISK OF LOSING AS MUCH AS 100% OF PRINCIPAL FOR THE OPPORTUNITY FOR A 6% TO 7% AVERAGE ANNUAL AFTER TAX RATE OF RETURN! And if you LOSE 30%, 40%, 60% or more of your account value, it can take years just to get back to even. For instance, on average, if you had put $100,000 into a Unit Investment Trust, (the precursor of our modern day Mutual Fund), in October of 1929 you would have lost $87,000 by 1932! It would have taken you 25 years just to get back to even. If you had invested $100,000 in a Mutual Fund in 1973, you would have lost $50,000 by 1974! It would have taken you 10 years just to get back to even.
THERE MUST BE A BETTER WAY!
Let's take a closer look at the Fixed Index Annuity when compared to the "average" equity mutual fund investor.
There are Fixed Index Annuities available currently that not only pay you 50% to 55% of the growth of the S&P 500 Index but also give you an "up front" incentive of 7% to 10%. This means that for an investor that puts $100,000 into either of these accounts, the account value will be either $107,000 or $110,000 on day number one before you ever begin to add your market based returns! And more importantly, the Fixed Index Annuity does all of this WITH NO RISK OF LOSS, ...GUARANTEED! Your account can never go backward and your gains become locked in and guaranteed each year as well. So, there's never any playing "catch up" like there can be with stocks or equity mutual funds.
But what happens to the Fixed Index Annuity when the market crashes? If you are in the Equity Index Account, your account value just receives 0% growth. Remember, your gains are locked in and GUARANTEED and your account can't go backwards. My clients describe ZERO'S AS HERO'S. Compared to LOSING 30%, 40%, 60% or up to 100% of account value in a crashing market with equity mutual funds, and then having to possibly wait 10 to 25 YEARS just to get back to even, you can understand why my clients consider ZERO'S AS HERO'S with their Fixed Index Annuities.